Pilgrim's PridePilgrim’s Pride which filed for bankruptcy last December with $2.72 billion in debt is preparing to exit bankruptcy.  The nation’s largest chick processer has secured $1.65 billion in proposed financing and is planning to ask a bankruptcy judge for approval of their plan to exit bankruptcy next week.  However, the plan faces the challenges from the U.S. Department of Agriculture.

In its objection the government stated “there is no authority to excuse noncompliance by the Debtor and the reorganized debtor with applicable federal law and regulations or to excuse, release, or bar appropriate actions by those agencies under federal law and regulations.”

Part of the proposed addition states that nothing in the plan shall prevent the government from “bringing any claim, suit, action, or other proceedings” against any party or person involved in the reorganized company for violating government laws and regulations.

In 2007 the Labor Department sued Pilgrim’s Pride Corp., in its attempt to collect $3 million in back wages were allegedly owed to more than 500 workers.  The lawsuit claims that Pilgrim’s Pride failed to pay overtime wages for the time workers spent putting on and taking off protective clothing. Also, the company allegedly failed to keep accurate overtime records since August 2005 and failed to pay workers 150 percent of their regular wages for the workweek that extended beyond 40 hours.

It is not currently clear if the bankruptcy plan stipulates that the government cannot sue Pilgrim’s Pride. However, like the GM bankruptcy, litigants may find it difficult to extract payment from any new company formed and may be limited to attaching the assets of the “old” Pilgrim’s Pride business.

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